What is the best business? What business should I buy? How do I decide which business is right for me? These are all great questions and while there are many things you can take & should take into account; I like to answer it this way:
What problems to do you like to deal with or willing to deal with?
I think of this way because there is no such thing as a perfect business, however, one business maybe more perfect for you. Therefore, sometimes a good way to look at or think about it is to look at the negatives (they always exist). A good way to understand it is I either like to deal with these problems or I know how to deal with these problems and am willing to do so. Remember that you will be spending between 40 and 80 hours a week at the business you choose to buy.
I like to think of what I just said as providing a mindset that colors the way you evaluate your search.
Normally we think of price being the first consideration. Try putting this aside, as usually this amount is related to how much you are willing to spend or put at risk. An important factor. However, there may be ways to mitigate the risk or allow you to leverage the funds you have available. As Business Brokers or Intermediaries, we at Anchor Business Brokers are here to help you with these considerations.
So, going back to our original question: How do you know which is the right business for me to buy? Speaking with an Intermediary such as Anchor Business Broker will help guide you through the process.
There are clearly certain things you should take you into consideration:
- What are your technical skills?
- Do you have appropriate management skills?
- What are your financial abilities – can you keep books and records and if not, how will you deal with it?
- Of course, there is the real financial question how much money do you need, can I afford this? We are here to help you answer that questions.
- How are you people skills – Clients – Staff?
- What are your business & personal or family goals?
- What are your financial goals? i.e. How much money do I need to make? Consideration should be both short and long term.
None of what I am speaking about here has to do with due diligence, that is another subject. It has everything to do with making sure you have a realistic understanding of your abilities. This will help develop a criteria which you will use to select and evaluate businesses.
However, selecting a business to evaluate is part intuitive and part analytical. The intuitive part is sort of “like love at first site”. “This looks like fun!” “I can see myself doing this, it’s easy.” I know it seems odd, but the first evaluation point is some sort of visceral connection with the business. Then comes the serious evaluation of the business.
Based on the above we sort through the thousands of businesses that are available and develop a list of available business that meet the criteria we have established. What comes next is for the businesses we selected to obtain both initial financial information and meet with the seller. I call this process the “sniff test”. This assessment of the business will be based on the information that has been presented by the seller and meetings with them – asset values, sales revenues, adjusted cash flow and other pertinent information must be assumed to be materially accurate and reliable. If it doesn’t “smell” right, we go no further and don’t spend a lot of money and time on detailed evaluation (due diligence).
A more detailed discuss of steps & process involved in buy a business will be discussed in future articles. Additional information on the buying process can be found here – 10 Steps to Buying a Business